Electrosource, Inc. v. Horizon Battery Technologies, Ltd.

• Decision Date: 24 May 1999
• Docket Number: No. 97-50709,97-50709
• Citation: 176 F.3d 867
• Parties: ELECTROSOURCE, INC., Plaintiff-Appellant, v. HORIZON BATTERY TECHNOLOGIES, LIMITED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 867

176 F.3d 867

ELECTROSOURCE, INC., Plaintiff-Appellant, v. HORIZON BATTERY TECHNOLOGIES, LIMITED, Defendant-Appellee.

No. 97-50709.

United States Court of Appeals Fifth Circuit.

May 24, 1999.

Terriann Trostle, Houston, TX, John Pike Powers, Marcy Hogan Greer, Mary Schaerdel Dietz, Fulbright & Jaworski, Austin, TX, for Plaintiff-Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before WIENER and DENNIS, Circuit Judges. ^*

DENNIS, Circuit Judge:

Electrosource, Inc. ("Electrosource") appeals the district court's dismissal of its suit against Horizon Battery Technologies Limited ("HBTL") for lack of personal jurisdiction. Concluding that Electrosource has established a prima facie case that HBTL is subject to in personam jurisdiction in Texas, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

Electrosource Inc., a Delaware corporation with its principal place of business in Texas, is the owner and licensor of an electrical storage battery known as the "Horizon Battery." Electrosource developed its patented battery technology in Texas.

In 1993, Electrosource participated in discussions with Metropolitan Industries Inc. ("Metropolitan"), an Indian company, concerning the purchase of a license permitting the manufacture and distribution of the Horizon Battery in India and Asia. These discussions led to the parties signing a preliminary Memorandum of Understanding. The Memorandum of Understanding provided that Electrosource and Metropolitan had agreed to create a joint venture agreement in the future. Ultimately, however, the parties did not fulfill the agreement and a joint venture was not created at that time.

Thereafter, licensing discussions resumed between Electrosource and HBTL, another Indian company apparently affiliated with Metropolitan. HBTL was not licensed to do business in Texas and had no offices, agents, or employees in Texas. During this round of negotiations, six different HBTL representatives made a series of six trips from India to Texas. Furthermore, during the negotiations, correspondence was sent from India to Electrosource in Texas. As before, these negotiations centered around licensing the Horizon Battery technology that was developed in Texas.

The fruit of these extensive negotiations was a "Know-How License Agreement" ("Agreement") that was signed by both Electrosource and HBTL in Texas in 1994. The Agreement specifically provided that confidential know-how would be provided to HBTL at the offices of Electrosource in Texas and HBTL employees and consultants would be trained in Texas in matters associated with the Horizon Battery. Although the choice-of-law clause called for Indian law to govern the agreement, the parties agreed that the laws of Texas governed the arbitration clause of the Agreement. Additionally, the Agreement included a provision that allowed Electrosource to inspect HBTL's manufacturing facilities in order to maintain uniformity and quality control for the duration of the license.

The Agreement directed that a number of implementation agreements had to be negotiated and executed before licensing would take place. The Agreement also required HBTL to pay a licensing fee and obtain a Letter of Credit to secure the fee. The parties also expressly provided in the Agreement that unless these conditions precedent were fulfilled within one year after its signing, the Agreement was to have no force and effect.

Soon after the Agreement was executed, Electrosource began preparation of the preliminary design review ("PDR") in Texas. The items to be presented in the PDR were preliminary versions of controlling documents, such as the Quality Assurance Plan, Equipment Design and Procurement Plan, Construction Project Management Plan and a Cost Pricing Analysis. The PDR was a necessary predicate to the implementation agreements. In the meantime, HBTL made several payments for various equipment and testing devices to Electrosource at its bank in Texas. HBTL, however, only made partial payments for the work completed in Texas. Because HBTL did not make full payment, Electrosource did not complete the PDR. After a year passed, Electrosource decided that the Agreement had been terminated because HBTL had not complied with any of the condition precedents.

HBTL responded by demanding that Electrosource either perform the contract or pay five million dollars in damages. HBTL also threatened to invoke the arbitration clause in the Agreement and implied that it was the licensee of the Horizon Battery. Electrosource filed a petition in Texas state court for a declaratory judgment that the Agreement had no force and effect. After the case was removed by HBTL, the district court granted HBTL's motion to dismiss Electrosource's action for want of in personam jurisdiction over HBTL. Electrosource appealed.

STANDARD OF REVIEW

Absent any dispute as to the relevant facts, whether in personam jurisdiction can be exercised over a defendant is a question of law and subject to de novo review. Ruston Gas Turbines, Inc. v Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir.1993). When jurisdictional facts are disputed, all factual conflicts are resolved in favor of the party seeking to invoke the court's jurisdiction. Id.

IN PERSONAM JURISDICTION

To exercise personal jurisdiction over a nonresident defendant, two requirements must be met. First, the nonresident defendant must be amenable to service of process under a State's long-arm statute. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir.1992). Second, the assertion of in personam jurisdiction must be consistent with the 14th Amendment's due process clause. Id. Because Texas' long-arm statute has been interpreted to extend to the limits of due process, we need only determine whether subjecting HBTL to suit in Texas would offend the due process clause of the 14th Amendment. Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990).

Due process requirements are satisfied when personal jurisdiction is asserted over a nonresident corporate defendant that has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940).

MINIMUM CONTACTS

The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which the individual has established no meaningful "contacts, ties, or relations." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985), citing International Shoe, 326 U.S. at 319, 66 S.Ct. at 159. In requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977) (Stevens, J., concurring), the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." Burger King, 471 U.S. at 474, 105 S.Ct. at 2183, citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Where a forum seeks to assert specific jurisdiction over a nonresident defendant who has not consented to suit there, this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984), and the litigation results from alleged injuries that "arise out of or relate to" those activities. Burger King, 471 U.S. at 472, 105 S.Ct. at 2182.

In determining when a potential defendant should "reasonably anticipate" out-of-state litigation, the court frequently has drawn from the reasoning of Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283 (1958):

The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Id., citing International Shoe, 326 U.S. at 319, 66 S.Ct. at 159. (Emphasis added).

The Supreme Court stated that this purposeful availment element "ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts, or of the 'unilateral activity of another party or a third person.' " Burger King, 471 U.S. at 475, 105 S.Ct. at 2183. The contacts with the forum State must be such that it is foreseeable that the defendant "should reasonably anticipate being haled into court there." World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567.

A contract with an out-of-state party alone, although relevant, does not automatically establish sufficient minimum contacts. Burger King, 471 U.S. at 478, 105 S.Ct. at 2185. A "highly realistic" approach is called for, recognizing that a contract is ordinarily but an intermediate step serving to tie up prior negotiations and future consequences which themselves are the real object of the business transaction. Id. The factors of prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing must be evaluated in determining whether the defendant purposefully established minimum contacts within the...